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Insurance Regulator Targets Warranty Scammers

State Insurance Commissioner Kim Holland and the Oklahoma Insurance Department have been aggressively tackling service warranty companies operating without a license.Unlike many other states in the U.S., Oklahoma law requires service warranty providers to be licensed, similar to other insurance providers.The OID’s action is the result of complaints from consumers who say they’ve received persistent and annoying phone calls from companies trying to sell them home, auto or product warranties. The OID has followed up on these calls, investigating the companies and making them to verify that they’re operating within state regulations.In the past three or so months, Holland said, the number of calls received by citizens from warranty service companies has increased, although she’s not sure why. “We’ve received hundreds — literally hundreds — of complaints,” Holland said. “People are so frustrated with the number of calls they’re getting from these companies. Some companies use rather misleading sales tactics. They call and say that your warranty is going to expire when there is actually no warranty.”If those companies aren’t properly licensed in Oklahoma, Holland’s department issues a cease and desist order, demanding the company halt operations and proceed with the state’s licensure process. If the company continues to do business without a license, the commissioner may issue the company a fine of up to $25,000, as she did recently with two companies: National Home Protection Inc. and Automotive Warranty Solutions.“Our concern is that these companies are legitimate,” said Holland. ”Just because they’re not licensed doesn’t mean they’re not legitimate, they’re just not abiding by our laws.”The goal of investigating these companies and, when necessary, issuing cease and desist orders, is to protect Oklahoma consumers, Holland said.Since April 1, the insurance department has issued nine cease and desist orders and nine suspensions. A cease and desist is ordered when a company is not licensed, but a suspension is imposed when a company has a license but fails to meet current state requirements under the license.According to insurance department officials, a suspension is obtained when a company is insolvent or fails to meet the financial requirements or is not complying with the Service Warranty Act.Of the suspensions, four have temporary stays of the suspension in place because they have corrected the financial problems, two will likely have stays in place by the end of the month and three have contacted the department to set up meetings to discuss their financials.Of the cease and desist orders, one has become licensed, two are attempting to become licensed, three appear to have quit doing business in the state, one has been dismissed and two have not responded, so the insurance department is not aware of their status.In the cases of National Home Protection Inc. and Automotive Warranty Solutions, they did not respond to Holland’s cease and desist orders and continued to do business in Oklahoma without a license, and Holland strapped them with a $25,000 fine. The New York attorney general recently shut down National Home Protection Inc. after it was determined that the company was running a scam operation.Automotive Warranty Solutions has 30 days from the time of the fine to appeal the commissioner’s actions, and, following that time period, the commissioner can use local law officials to enforce the fine.At the time of publication, Holland had not yet received a response from Automotive Warranty Solutions and was not sure whether the company was still doing business in Oklahoma, either under that name or another.She said that when companies that are ordered to cease and desist disappear, it is usually because they are scams.The process for achieving licensure for a warranty service company in Oklahoma is as follows: The company first submits an application with fee, then provides proof of registration with the Secretary of State and a copy of its Articles of Incorporation. The company must provide a bond or proof of a contractual liability policy covering all claim exposure as well as certified financial statements. The OID reviews the application and makes sure the company is set up correctly and is licensed in its state of domicile.An analyst does a financial review confirming solvency and compliance with the application requirements, and then all forms are filed for approval.When she receives calls from consumers who suspect they’re being contacted by a scam warranty agency, Holland says she investigates the company by doing complete background checks, thoroughly researching the company, what its history is, where it is licensed, what states is does business in and its record for doing business in those states. She often collaborates with other states’ insurance agencies, she said.Holland said it’s important for Oklahoma consumers to be aware of possible scam artists and offered this advice: “Do not respond to any unsolicited phone calls. If you need a product, go talk to a trusted source. Get a reference from a trusted source. There are a lot of very legitimate, hard-working insurance people out there. “If you get a call that sounds vaguely interesting and you want to hear them out, take their information but never commit to anything. Do not give them any personal information before you check them out. Get their name, company name and insurance license number. If they won’t give you that info, hang up the phone. “Be vigilant, astute and cautious when talking to people you don’t know. People of all ages can get duped into giving personal info over the phone.”If you do hang on to the call long enough to get the company’s information and you want the OID to check it out, call 1-800-522-0071.%D?n insurance policy with bodily injury coverage covers%D%A